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Ans;- Retail market segmentation is the process of aggregating customers with similar wants, needs, preferences, or buying behaviour. The segmentation process is divided into a heterogeneous process follows four broad steps: i) The definition of the market to be addressed. ii) The identification of alternative bases for segmentation. iii) An examination of these based and the choice of the best base or base for segmentation. iv) The identification of individual market segments, an assessment of their attractiveness and the selection of specific target market.
A market is a group of potential customers with similar needs who are willing to exchange something of value with sellers offering various goods and services that can satisfy these needs. The marketer has the option of either approaching the entire set of customers with a uniform marketing approach or adopting a differentiated approach for different sets of customers. While the former refers to mass marketing, the latter refers to the strategy of market segmentation
• • • •
Segmentation : Heterogeneous total market to small groups of homogenous segments with similar wants , needs and characteristics that responds to specific marketing mix ( 4 P) Examples total market : Men and women Women: Working women and housewives Working women: Young, middle aged A segment is a relatively homogeneous group and hence responds to a marketing mix in a similar way. Different groups or segments require different promotional strategies and marketing mixes because they have different wants and needs. If you are marketing fashion garments above segmentation is useful. But if you are marketing rice then this segmentation may not serve the purpose
Niche : A niche is a more narrowly defined group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub-segments. Future group has special outlets called “ All” for those Indian men and women typically short , overweight with higher income group. Normally niche market is not served by large scale competitors working on volumes. Entrepreneur finds a gap and develop Niche market giving customized marketing mix. Segmentation based on Consumer products: Consumer products are those products that are intended for the ultimate consumer. Consumer products can be sub-divided into four sub-groups: 1. Convenience products 2. Shopping products 3. Specialty items 4. Unsought items 1. Convenience products Convenience products are products that are purchased frequently but on which the consumer not willing to spend much time or effort. These include staples like packaged foods, milk, bread, and emergency products like medicine. Shopping products( comparison products) : Shopping products are products that a customer feels are worth the time and effort to compare with competing products. These include furniture, clothing, washing machines, television sets, etc. Specialty items: Specialty products are consumer products that the customer makes a special effort to purchase. The consumer is willing to search for such specialty products. Any branded product that customers insist on by name is a specialty product. Unsought items: Unsought goods are products that potential customers do not yet want or know about. Customers do not buy such products unless promotion shows their value. Life insurance and encyclopedias are examples of unsought products. 1. Explain any four theories of institutional changes taking place in retail. Give examples. Ans;- Theories of institutional changes 1. Dialectic process 2. Gravity model 3. Retail accordion theory 4. Wheel of retailing theory 5. Natural selection theory
6. Central place theory 1-Dialectic process (Dialectics are based around three concepts: • 1: Everything is made out of opposing forces/opposing sides. • 2: Gradual changes lead to turning points, where one force overcomes the other. • 3: Change moves in spirals not circles) An evolutionary theory based on the premise that retail institutions evolve. The theory suggests that new retail formats emerge by adopting characteristics from other forms of retailers in much the same way that a child is the product of the pooled genes of two different individuals. Melting pot : two institutional forms with different advantages modify their format till they develop a format that combine the advantages of both. Advantages of new competitors are copied by existing businesses by adopting same strategies. Hence both companies practically gets in distinguishable unless competitor changes. The Dialectic Process THESIS Department store High margin Low turnover High price Full service Downtown location Plush facilities SYNTHESIS Discount department store Average margins Average turnover Moderate prices Limited services Suburban locations Modest facilities ANTITHESIS Discount store Low margin High turnover Low price Self-service Low rent location Spartan facilities
Examples of dielectric process Indian udipi and specialty restaurants now trend is Indian udipi restaurants serves south Indian, Punjabi and Chinese dishes, pizza etc While McDonald is going for Indian dishes such as Wada –pav Cheap air line low service + High end airline with high service Will change both so that both are middle price middle service airline
Indian udipi and specialty restaurants now trend is Indian udipi restaurants serves south Indian, Punjabi and Chinese dishes, pizza etc While McDonald is going for Indian dishes such as Wada –pav Cheap air line low service + High end airline with high service Will change both so that both are middle price middle service airline Gravity model • A theory about the structure of market areas: The model states that the volume of purchases by consumers and the frequency of trips to the outlets are a function of the size of the store and the distance between the store and the origin of the shopping trip. • • Gravity is pull it depends upon the mass of item . Bigger the mass , it has capacity to attract smaller masses. Force of attraction depends upon mass and inversely proportional to square of distance
In Retail more assortment and larger the store means more pull to attract customers. And more the distance of store from customer lesser is the pull. This means customers have inertia to move .Unless the pull (large format, large assortment) is more they will prefer to buy at a closer location ( small format, less assortment) • In 1931 a gentleman name William J. Reilly wrote a retail axiom that is still used today for market planning of retail stores. It is commonly known as Reilly's Law of Retail Gravitation and was inspired by Newton's law of Gravitation which stated "two bodies attract each other with a force that is proportional to the product of their masses and inversely proportional to the square of the distance between them." Reilly's formula is used to predict the likely division between two trade centers at which shoppers will go one way or the other.
Reilly recognized that trade centers produce gravitational pull. Further he realized that bigger trade centers had more mass and therefore, as stated in Newton's Law, more gravity. Here's a new scoop, though. Your store produces a gravitational field as well. The gravitation that your store produces is based on a number of elements, not the least of which is its size. Knowing this fact can aid you in the management of your business. Wheel of Retailing Theory It is a theory of retail institutional changes that explains retail evolution with an institutional life cycle concept.
Describes how new types of retailers enter the market as low-status, low-margin, low-price operators; however, as they meet with success, these new retailers gradually acquire more sophisticated and elaborate facilities, and thus become vulnerable to new types of low-margin retail competitors who progress through the same patter. • Definition: The Wheel of Retailing is a theory to explain the institutional changes that take place when innovators enter the retail arena. The Wheel of Retailing concept states that new types of retailers usually begin as low-margin, low-price, low-status operations, but later evolve into higherpriced, higher-service operations, eventually becoming like the conventional retailers they replaced
Some would argue that McDonald’s has become a victim of the wheel of retailing. When McDonald’s started out, it served a select menu. Over the years, the McDonald’s product offering has expanded to the inclusion of playgrounds, thus opening the way for new, low-cost fast-food providers, such as Checkers.
Natural Selection Theory It is a theory of retail institutional changes that states that retailing institutions that can most effectively adapt to environmental changes are the ones that are most likely to prosper or survive. Based on Darwin theory of evolution Adopting to changing environment or perish Retail institution that are flexible to adopt , survive and prosper They need to change all 4 Ps 1. Product 2. Price 3. Promotion 4. Location Changes can be social, economic, political, legal , technological
Is based on the idea that all firms seek superior performance in an ever-changing environment. • Illustrates two important lessons for retailers: • Superior performance at any point in time is a result of achieving a competitive advantage in the market place as a result of some tangible or intangible entity (“resource”). • All retailers cannot achieve superior results at the same time. Central Place Theory • The essence of the theory is that settlements act as central places providing one or more services for their surrounding areas, and that they vary in their importance, or order, according to the number and type of other settlements dependent upon them, and according to the number and type of services, or functions, they provide. Services are also ordered: lower-order functions include the types of services provided by a village shop; higher-order functions include department stores and hospitals. Cities and large towns are classified as high-order settlements because they supply both low- and high-order services, the latter to both their own inhabitants and to those living further away. A village with one small shop would be of a very low order. • It is a model that ranks communities according to the assortment of goods available in each. At the bottom of the hierarchy are communities that represent the smallest central places (centers of commerce). They provide the basic necessities of life. Further up the hierarchy are the larger central places, which carry all goods and services, found in lower-order central places plus more specialized ones that are not necessary. 2. Define retail strategy and discuss retail mix for major retailers like Walmart, Big bazar, Pune Central and West side Ans;- Retail market strategy: • Meaning, • Retail strategic planning process, • retail organization, • management and human resource policies, • Strategic positioning, • developing competitive advantage Success in retail = Well thought plans + Processes +implementation
Strategy the retail perspective: Definition: A clear and definite plan that retailer outlines to tap the market and build a long term relationship with customers. It define purpose and provide guidance how retailer should face challenges in dynamic conditions Retail strategy also enables areas within organization to define their strategies • Store location • Store formats • Merchandising • Marketing : Retail market strategy • Finance • Organization
Decision Variables for Retailers
Store Design and Display
Wal-Mart’s Retail Mix
Customer Service Store Display And Design
Wal-Mart’s Retail Mix
Store Design and Display
Large Number of Categories Few Items in Each Category
Wal-Mart’s Retail Mix
Store Design and Display Merchandise Assortment
TV and Newspaper Insert Ads
Wal-Mart’s Retail Mix
Store Design and Display
Basic, Special Displays for Products
Wal-Mart’s Retail Mix
Location Customer Service Merchandise Assortment
Store Design and Display
Wal-Mart’s Retail Mix
Location Merchandise Assortment Store Design and Display
Human Resource Management
Retail Market Strategy Financial Strategy
Information and Distribution Systems
Customer Relationship Management
“Strategy” Is Over Used
Retailers Talk About A Lot of Different “Strategies”
– Sales Strategy – Advertising Strategy – Merchandise Strategy – Location Strategy Strategy Is Not Just Another Term for A Management Decision
4-Describe the process of retail planning and networking. Give examples Ans;- Strategic retail marketing is the process of planning the retail concepts on effective manner keeping in mind the comparative environment to place the products effectively
Planning of marketing program Implementation by networking with key partners
Retail Planning Networking 1. Develop mission statement 2. Establish Objectives 3. Conduct situational analysis 4. Identify strategic alternatives 5. Select market to compete 6. Obtain resource needed to compete 7. Developing positioning strategy 8. Implement the strategy 9. Evaluation of results
Retail Planning Networking
Mission:PURPOSE someone's duty or purpose in life. Those aspects of company that are to be enduring and unchanging long Policy period of time
Mission Strategy Tactics Programs Projects
Vision - A guiding theme that articulates the nature of the business and its intentions for the future.
Strategy - This describes the direction the business will pursue within its chosen environment and guides the allocation of resources and effort.
Retail Planning Networking: Mission
• Vision • A guiding theme that articulates the nature of the business and its intentions for the future. These intentions are based on how management believes the environment will unfold and what the business can and should be in the future. A vision has the following characteristics: (1) informed-grounded in a solid understanding of the business and the forces shaping the future, (2) shared and created through collaboration, (3) competitive-creates an obsession with winning throughout the organization, and (4) enabling-empowers individuals to make meaningful decisions about strategies and tactics.
Retail Planning Networking: Mission
• Mission statements are "enduring statements of purpose that distinguish one business from other similar firms. • A mission statement identifies the scope of a firm's operations in product and market terms. It addresses the basic question that faces all strategists: • What is our business? A clear mission statement describes the values and priorities of an organization. Developing a mission statement compels strategists to think about the nature and scope of present operations and to assess the potential attractiveness of future markets and activities. • A mission statement broadly charts the future direction of an organization.
Retail Planning Networking: Mission
• • • • • PEPSI - "Beat Coke" HONDA - "We will crush, squash, and slaughter Yamaha" NIKE - "Crush Reebok“ Wal-Mart (1990)"Become a $125 billion company by the year 2000" Sony (1950's)"Become the company most known for changing the worldwide poor-quality image of Japanese products" Boeing (1950)"Become the dominant player in commercial aircraft and bring the world into the jet age" Ford Motor Company (early 1900's)"Ford will democratize the automobile“ Google's mission is to organize the world's information and make it universally accessible and useful.
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Retail Planning Networking: Mission
• Wal-Mart“ To give ordinary folk the chance to buy the same thing as rich people." • Mary Kay Cosmetics "To give unlimited opportunity to women." • 3M"To solve unsolved problems innovatively" • Merck“ To preserve and improve human life.“ • Walt Disney“ To make people happy."
Retail Planning Networking
• Pantaloon MISSION We share the vision and belief that by improving our performance through innovative spirit and dedication, we shall serve our customers and stakeholders satisfactorily. We shall be the trendsetters in fashion and offer a fair deal to all our customers. The company shall strive to be the Indian Retailing Conglomerate, an efficient and low cost operator with a commitment to quality. Our positive attitude from our devotion, Sincerity and united determination shall be the driving force to make us globally competitive. • VISION: To emerge as the best & the most profitable retailer in India.
Retail Planning Networking
Develop Mission statement
• A mission statement defines the core purpose of the
organization - why it exists. The mission examines the "raison d'etre" for the organization beyond simply increasing shareholder wealth, and reflects employees' motivations for engaging in the company's work. Effective missions are inspiring, long-term in nature, and easily understood and communicated. Reason or justification for existing. A statement that captures an organization's purpose, customer orientation and business philosophy. A mission statement outlines what the company is now. It focuses on today; it identifies the customer(s); it identifies the critical process(es); and it states the level of performance.
Retail Planning Networking
Formal statement what firm achieve
A concise statement describing the specific things an organization must do well in order to execute its strategy. Objectives often begin with an action verbs such as increase, reduce, improve achieve, etc.
Short term and long term objective 1.Specific 2.Measurable 3.Attainable 4.Indicative of priorities Starbucks : 30000 outlets by 2010
Retail Planning Networking
Conduct situational analysis
Financial resources Physical assets Management skills Merchandize
Political Economical Social Technical
Retail Planning Networking
1. 2. 3. 4. Identify Strategic alternatives Market penetration Market development Retail format development Diversification
A strategy is a long term plan of action designed to achieve a particular goal. Strategy applies to many disparate fields, such as: *Military strategy*Marketing strategies
Retail Planning Networking
Obtain resources needed to compete 1. 2. 3. 4. New company JV Franchising Human resources
Retail Planning Networking
Develop Positioning Strategy
Variety Vs assortment 1.Input: Core variable ( Customer, competition, Key Appeal) 2.Positioning strategy
3.Output : Retailing marketing mix variables Brands, pricing, location, pricing, customer service
Variety/Assortment Turnover Vs gross margin Price Vs Service
Retail Planning Networking
Implement strategy Action plan Assigning ownership Establish critical path Linking action plan to operating plan Focus on 4 P
Retail Planning Networking
Dynamic market conditions Plans to be evaluated Merchandizing Financial Pricing Distribution HR
Are we on track?
3. Define organization as applicable in retailing. Discuss two basic forms of retail organizations with examples. Ans:• Retail organization – Organizational structures - Departments in retailing • A deliberate arrangement of people to achieve a particular purpose • An organization is a formal group of people with one or more shared goals.
Company, corporation, firm, enterprise, authority or institution, or part or combination thereof, whether incorporated or not, public or private, that has its own functions and administration
Retail organization • Organization is key factor that affects functioning of various roles in the organization Organization defines • Hierarchy level • Reporting relationship • Decision making
How to mange the organization?
Task and activities to be performed in a retail organization 1. Top management 2. Buying and merchandising 3. Store operation 4. Administration and human resources 5. Support function like advertising, marketing, public relationship, finance
• Tasks to be performed in a retail organization Management
Buying And Merchandising
Branding Store operation Admin/ legal HRM Finance Accounting Marketing Adv Pr
Consideration for organization • Own requirement • Targets to be achieved • Needs of Target market • Needs of internal customers: employees
Org structure enables performance of various activities and task
Need for flat organization
Two forms retail organization:Planning and Assessing a Retail Organization: Factors to Consider
Planning &* Assessing a Retail Organization: Factors to Consider
Planning & Assessing a Retail Organization: Factors to Consider
Retail organization Small/single/independent store
• Owner/ Manager
Responsibilities: Buying/Promotion/Sales/HR / Operational control/ General management
Lawyers /CA Bankers etc
Back office staff
Accounting/Record keeping Data entry/inventory control PO/time keeping/Payroll Facility management
Customer service Selling Stock control Display housekeeping
6. Define merchandising planning and explain in detail merchandising planning process. Ans:Merchandise planning Merchandise Planning is "A systematic approach. It is aimed at maximizing return on investment, through planning sales and inventory in order to increase profitability. It does this by maximizing sales potential and minimizing losses from mark - downs and stock - outs." What is equally important it that profit increase can be delivered in a sustained way. That is "Merchandise Planning”. Systematic approach is Systems to ensure that you have the right people, the right processes and the right computerized support. Without the people and processes you will get nowhere. The software available is merely an enabler - the final piece of a jigsaw.
Considerations in Devising Merchandise Plans
Maximizing return on investment Stocks, Retail space, people, infra structure . Consider opportunity cost of investment while calculating return. Planning sales and inventory
These two elements are inextricably linked and finding an optimum balance is the key to retail success. Balance carefully the requirement to support sales with the constraints and tensions imposed by store layouts and warehousing and transportation issues. Increase profitability: Avoid mark down and stock out Merchandise planning is a strategic process. Create systems that lead seamlessly and in an integrated way from top level strategy to tactical action. In creating a holistic system, split the planning process into four logical sections Review Merchandise planning Range planning Space planning
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Merchandise planning is key to making profit Procurement of material depends on planning and control. Time required to 1. Buy merchandise 2. Deliver merchandise 3. Record deliver 4. Send merchandise to required stores Starting point of merchandise planning is analysis of what customers wants and needs and how they want to buy. This is for developing sales forecast. Stage 1: Developing sales forecast Input to forecast by top management or prepared by merchandiser on targets. Inventory needs of product/category 1. How much each product to be purchased? 2. Should add new products to merchandise assortment 3. What price to be charged for products? Sale forecast : short term ( days/weeks) and long term months or years Consider changes in taste and attitude of target customers before forecasting for given period. Stage 1: Developing sales forecast (continued) Steps to develop sales forecast 1. Reviewing past sales such as last years sales data 2. Analyze changes in economic conditions such as changes in GDP, FDI 3. Analyze changes in sales potential such as demographic changes 4. Analyze changes in marketing strategies with organization and competition such as changes in formats, introduction of new products 5. Creating sales forecast: estimate projected sales as applied to various products and categories. 6. Decide sales that is achievable in terms of sales target and expected revenues Stage 2: Determining the merchandise requirement Planning merchandise for right goods/right place/right time for customers 1. Creation of merchandise budget
2. Assortment plan Top down planning top management decides and organization follows Bottom up: individual department’s estimation of sales projection combined to final projections. After forecast finalization : inventory planning undertaken. Merchandise budget prepared for product inventories. Merchandise budget steps 1. Sales plan: How much to sell of each product? 2. Stock support plan: How much inventory for each product 3. Planned reduction plan: How much reduction in non selling products? 4. Planned purchase level: How much quantity of each product to be procured? 5. Gross margins: Difference between sales and cost per department to overall profitability of the company. Methods of inventory planning Basic stock method: planned monthly sales plus basic stock ( Av stock – Av monthly sales). Inventory is priority all the time. Percentage variation method: Stock turn over is more than 6 times Week supply method: Grocers way planning based on week as sales are constant Stock and sales ratio( SSR) method. Value of stock/actual sales: Planned beginning of month stock (BOM) = SSR X Planned sales Stock turn over rate effective measure of speed with which products moves in and goes out in store in given period Planned sales / Planned average inventory = stock turnover Six month merchandise plan: • First decide inventory planning method. • Prepare merchandise budget in advance for Selling season say for six month • It should be understandable, short term and flexible for environmental changes. • Buyer should stick to these norms. Stage 3 : Open to buy Definition: Open-to-Buy is the difference between planned purchases and stock already ordered; the dollar amount of merchandise that a buyer can order for a particular period. Open to Buy controls are a key element in the effective financial and merchandise control of a modern retailer. The challenge in retail is to make sure that we regulate the supply appropriately, potential zing sales by bringing in stock levels that provide the desired service level without incurring wastage from mark-down. Open to Buy systems normally operate using a flow calculation. This is shown in the following simple example where the closing stock for the first period is a result of adding the opening stock, on order and open to receive, and then subtracting the forecast sales. This closing stock then becomes the opening stock for period two and so on Open to buy Two fold purpose 1. Adjustment of merchandise buying based sales of month and reductions
2. Planned relation between stock and sales Purpose of open to buy , buyer ensures 1. Limit over and under buying 2. Prevent loss of sale due to stock out 3. Maintain purchase within budget 4. Reduce mark down as a result of over purchases Assortment planning: Process of deciding which products or merchandise to be bought and then arriving at quantity of each product or category to be bought is called as Assortment planning. Assortment planning involves • Determination of each product that will be purchased so as to fit overall merchandise plan. • Details of color, size, brand, material have to be specified Purpose: Create balanced assortment for customers
Stage 4 : Assortment planning: Type of merchandise Basic or staple, fashion, convenience or specialty Fashion merchandise: High demand for short time hence buying right quantity at right time required. Mark down in case of excess buying or seasonal change in fashion Staple /Basic such as white shirt, stationery etc. Buying based on past data. Seasonal staple ( rain coats etc) Purpose : Optimal merchandise mix
Merchandising Product line classification
Dept Product line Breadth Menswear Shirt Zodiac Trousers Indigo Accessories Arrow
Four step Buying process 1. 2. 3. 4. Identifying sources of supply Contacting sources of supply Evaluating sources of supply Negotiating sources of supply
What is a brand ? A name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers. The legal term for brand is trademark. A brand may identify one item ,a family of items, or all items of that seller. The sum of all the characteristics, tangible and intangible, that make the offer unique. Retailer’s own brand Private label products or services are typically those manufactured or provided by one company for offer under another company's brand. Private label goods and services are available in all industries from food to cosmetics to web hosting and are often positioned as lower cost alternatives to regional, national or international brands. Since the branding of private label consumer goods is often provided by the retailer, store brands are sometimes called private label brands.
7. Define and explain in detail process of category management Ans:- Retailing is a dynamic field where success depends on ability to respond .Category management helps managing the retail business. Competitive advantage and customer satisfaction through Category management. Category is basic unit of analysis for making merchandise decision Category is assortment of items that consumer sees as reasonable substitute for each other. Category management means managing category as strategic business unit. Definition: Category Management is a retailer/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value. Definitions 1. Continual monitoring of expenditures and supplier performance in specific buying categories with the intent of driving ongoing cost or supplier performance improvements. Also sometimes referred to as supplier relationship management or commodity management. 2. A relationship-oriented technique that some firms, especially supermarkets, are beginning to use to improve shelf-space productivity. 3. The management of brands in a group, portfolio or category with specific emphasis on the retail trade’s requirements Six components of category management First two are Core components and rest are enablers 1. Strategy : linked to company’s goals and mission 2. Business process: Process must be strong then results will follow 3. Performance measurement
4. Information technology 5. Organizational capabilities 6. Co-operative trading partner relationship
Six components of category management
Trading partner relationship
Category role Category assessment Category score card Category strategy Category tactic Plan implementation
Category Management Business Process
Category management business process Category definition: Category is defined based on how consumer buys and not on how retailer buys. But it is not unique In grocery : health food aerated drink
Perfumes in cosmetic
2) Defining category role Category role defines importance and priorities of various categories in overall business. This determines resource allocation. Destination category: main product in retail store Routine/preferred: routine purchases like tooth paste, soap Occasional/seasonal category: Mangoes , raincoat, winter wear Convenience category: consumer buys at convenient place such as neighborhood, bread , butter, ball pen
3) Category assessment: current performance of category is evaluated against turnover, profit, RO assets. Consumer/retailer/vendor are involved. 4)Category performance measures: Measurable target such as turnover, margin, GMROI 5)Category strategies: Capitalizing on category opportunities with efficient use of resources. Strategy can be building traffic, enhancing image, building profit or increase top line or just creating excitement 6) Category tactics .This is used for developing assortment, pricing, promotion 7)Category plan implementation by deciding roles and responsibilities and adhering to schedule. 8)Category review: Review entire process against actual and planned achievement .Review is against category target
Role of category captain
Retail appoint one party as category captain. Category captain is a vendor or supplier who develop specific category for retailer and also manages it. As being expert in specific category,, captain has in depth understanding about development and management of the category. Some time major manufacturers of category products acts as category captain.
Working of category management in India Category management is prevalent in mature markets. In India , it is still evolving.
Review merchandise /category performance
Develop Initial Assess Potential
Category management is great tool for retailers and Information sharing is the key to success
8. Define and compare private labels and national brands. Discuss in detail the growth of private labels in global and Indian retailing. Give examples. Ans:- A name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers. The legal term for brand is trademark. A brand may identify one item ,a family of items, or all items of that seller. The sum of all the characteristics, tangible and intangible, that make the offer unique. Retailer’s own brand Private label products or services are typically those manufactured or provided by one company for offer under another company's brand. Private label goods and services are available in all industries from food to cosmetics to web hosting and are often positioned as lower cost alternatives to regional, national or international brands. Since the branding of private label consumer goods is often provided by the retailer, store brands are sometimes called private label brands.
The Popularity of Private Labels Private labels, or store brands, are drawing an increasing amount of shelf space and luring consumers away from name-brand products. •Over the past five years, sales of private-label merchandise have grown 38%, while sales of branded products have grown 19The U.S. is slowly catching up to Europe, where 40% of products sold are private labels. In America, one in five products is store-branded. Costco (Kirkland), Federated's Macy's (INC apparel), Target (Michael Graves), The Home Depot (Hampton Bay), and Whole Foods (365 and Whole Kids) are some of the retailers with their own brands.
Rise of Private labels In emerging economies like Hungary, where consumer choices are driven by price rather than brand name, private label is a winning strategy. According to the global study by ACNielsen, a marketing information company, “across all of the 36 countries and 80 categories studied, private label products were priced on average 31% lower than their manufacturer counterparts.
At food and grocery retailer FoodWorld, the store brand accounts for around 20 per cent of sales amongst generic items such as rice, sugar and pulses, while the contribution of the store brand in value-added categories such as tea, honey and jams is one per cent of total sales. Lifestyle retailer Shoppers' Stop says its four store brands together account for approximately Rs 50 crore or 20 per cent of its turnover. For the Delhi-based Ebony, 25 per cent of apparel sales comes from its private label EbonyETC.
Manufacturers Vs Private label brands
Manufacturer’s brand ( National brands) •Owned and developed by manufacturer. •Image for brand established by manufacturer • Company’s name as brand name or part of it ( Sony, Samsung, Pepsi) •Separate brand name for each product Lux, Thumbs up. •These are also called national brands. •As these have appeal with consumer, they can enhance store image.
Manufacturers Vs Private label brands
Licensed brand Licensor or owner of particular image or design sell the right to use to other party called licensee. Licensee can be retailer or third party who contracts with manufacturer to produce licensed products. Character licensing: Cartoon such as Disney Corporate licensing: Akai Designer name licensing Pierre Cardin Celebrity name licensing: perfume by Sha rukh khan Nostalgia: Elvis Priestley
Private label products or services are typically those manufactured or provided by one company for offer under another company's brand. Private label goods and services are available in all industries from food to cosmetics to web hosting and are often positioned as lower cost alternatives to regional, national or international brands. Since the branding of private label consumer goods is often provided by the retailer, store brands are sometimes called private label brands.
There are different kinds of private labels which can be categorized the following way:
• • • • •
Store brands - The retailers name is very evident on the packaging Store Sub-brands - Products where the retailers name is low-key on the packaging. Umbrella branding - A generic brand independent from the name of the retailers name. Umbrella brands are used in different product categories. Individual brands - Name used in one category, this is only used to promote a "real" discount product line. Exclusive brands - Again a name used in one category, but to promote "added value" products within the category.
There has been a significant increase of private label brands in the recent years. In Europe, private labels now account for about 45% of products sold in supermarkets, compared to 25% in the USA. Walmart for instance has a 40% private label representation in their stores. Historically, private labels had been seen as low-priced, low-quality products. In recent years, however, companies have started using private labels to market higher quality items, and many believe high-quality private labels will increase their presence.
Depending on the retailing major's strategy, in-store brands already account for about 10 per cent to 80 per cent of sales for different Indian retailing firms Surely, with almost every retail chain launching products under their own private label or instore brand, the consumer has never had it so good as far as purchasing options are concerned. Says Kishore Biyani, CEO, Pantaloon Retail India, "Private label contribution in the Pantaloon departmental stores is currently over 70 per cent. We are in the process of increasing it to more than 80 per cent. In Big Bazaar, private labels have just been launched in the apparel segment (five labels have been launched over the past three months and three more are expected to be launched in the next month). We expect private labels to contribute more than 50 per cent in their respective categories."
Private label These are stores own brands. Private label products owned or developed or marketed exclusively for selling in own retail outlet. Low emotion involvement goods such as pickles, Atta, house hold cleaners. Example Foodworld phenyl. Power of private label increasing as size and reach of retailer have increased in last few year. Retailer have created trust in the minds of consumers. Private label brands products are less expensive than national brand products but costlier than un branded products. Private label brands are growing at much faster rate than national brands especially in Europe and developing economies. Private label These are stores own brands. Private label products owned or developed or marketed exclusively for selling in own retail outlet.
Low emotion involvement goods such as pickles, Atta, house hold cleaners. Example Foodworld phenyl. Power of private label increasing as size and reach of retailer have increased in last few year. Retailer have created trust in the minds of consumers. Private label brands products are less expensive than national brand products but costlier than un branded products. Private label brands are growing at much faster rate than national brands especially in Europe and developing economies. Private label : Europe around 45 % USA around 25 % Retailer % of private label of total sales 1. Wall mart 40 % 2. Carrefour 33 % 3. Tesco 40 % 4. Food-world 20 % 5. Pantaloon 70 % 6. Nilgiris 50 % 7 Westside 90 % Many Indian companies are exporting under private labels of leading retailer abroad. Example Balsara / Dabur exporting toothpaste Wall mart etc.
Manufacturers Vs Private label brands
National brands Owned/ Developed by manufacturers National brand has universal appeal and image Private labels Owned developed by Retailer Limited appeal to store consumers and image
National brand products are 10 to Private label products are 10 to 30 % costlier than private label 30 % cheaper than national brands but 10- 40 % costlier than un branded products National brands are promoted by manufacturers and are available in from variety of channels Establishing National brands is expensive Private label products are available through specific stores Establishing store brand is relatively in expensive
Manufacturers Vs Private label brands
National brands National brands are independent of small scale manufacturers. High level of promotion is required to generate and keep customer loyalty National brand appeals to high end customers Examples : Sony, Coca cola, Pepsi, Lux, Zodiac National brand growth rate is lower compared to private label Private labels Small scale manufacturers are benefited by development of private labels as supplier As Stores are in direct touch with consumers hence direct promotion is possible Store brands appeal to price conscience customer with good quality inclination. Examples “ Stop at shopper stop, Westside clothes, Pantaloon Private label growth rate is 2030 % higher than national brands.
12).Discuss various aspects of rural retailing in India. What are the innovative formats used by major retailers to capture this market?
Ans12) But visit its farms, which produce potatoes, chilies and wheat, and amidst which stands the imposing green and yellow building of Choupal Saagar (an ITC rural retail initiative) some six km off the main town centre near Meerat, and you'll get the surprise of your life. Spread over 4.28 acres, the local Choupal Saagar wholesale-cum-retail store has already become the one-stop shop that acts not only as the lightning rod for the aspirations of the region's semiurban and rural populace, but also as a catalyst that's taken farming some way already along the gilt-paved road of high-technology. Inside, the Choupal Saagar's shelves are crowded with groceries (not just from the ITC stable, but other brands as well), footwear (old-style Bata, still a favorite, competes with newer labels for attention), toys, apparel (John Players), and even video and audio systems, computers and mobile phones (Nokia phones seems like the obvious choice). The sense of flux you get is a little disorienting. Hindustan Lever Limited (HLL) has pioneered new forms of rural distribution with its widely discussed Shakti campaign, which recruits female members of village self-help groups and trains them to become direct-to-home distributors of HLL products. Eveready, the market leader in batteries and flashlights, operates a fleet of over a thousand company-owned vans and has over 4,000 distributors to directly service 600,000 retail outlets. India’s rural retail market is expected to grow by 29% to $45.34 billion by 2010, helped by rising incomes and changing consumption patterns, a CII and Yes Bank report said. But poor
infrastructure, supply chain inefficiency, and product pricing must be addressed if its full potential is to be realized, the report on Thursday said. The report said rural per capita income would double to Rs 14,000 by 2012 as more families switch to commercial from subsistence farming, a big enough jump to spur demand for a wider range of products. Corporates are increasingly eyeing rural areas as drivers of future growth. The Godrej group’s retail venture, Adhar, which has 31 rural stores, is planning to have 1,000 in the next five years. Triveni Khushali Bazar plans to almost double its stores to 80 by 2008, and reach 200 by 2009. What have prompted India Inc's to turn its energies to rural retailing are a slew of facts that rural markets are growing at double the rate of urban markets, more than 60 per cent of the country's 1.12 billion population livein rural areas and 87 per cent of rural markets do not have access to any sort of organized marketing and distribution, said YES Bank Country Head, Food and Agribusiness Strategies, Kalyan Chakravarthy G.K.D. While a number of products on the rural retail shelf are agro-based, companies are eager to make available products varying from cricket bat to customized credits in association with banks) in rural areas, following the expansion and entry of new players into this emerging sector. Godrej Aadhaar, the rural retail initiative of Godrej Agrovet Ltd, announced on Monday that it is planning to set up at least 1,000 stores across rural India in the next five years. The Godrej Aadhaar brand has grown to a chain of 18 stores providing a host of services to farmers and their families within an year of setting up. The company is now in the process of developing these outlets into a one-stop solution for all the needs of the rural populace, Mr C.K.Vaidya, Managing Director, said. Positioned as `Godrej Aadhaar - Khushiyon Ka, Khushhali Ka', the new format stores mark the beginning of a chain which shall form the farmer's Aadhaar for `Unnati, Ghar Sansar & Gaon', a move from being just a complete agricultural solution provider to being a multi category retail outlet with wide range of products and services housing a fair mix of brands and private labels. The company is in the process of talking among others to Apollo Hospitals to set up pharmacy/polyclinics at the large format stores. The new format Aadhaars will provide a very conducive retail atmosphere and women-friendly interface, company officials said. The company launched the first couple of these new large format retail stores at Mancher and Alephata in the Pune district of Maharashtra on Monday. The new format stores sprawl over an area of around 10,000 sq.ft. at Mancher and 3000 sq. ft. at Alephata on the PuneNashik Highway. These stores not only offer complete agricultural solutions and products for the farmers but also a wide range of commodities for rural households. While organized retail centered on these stores, unorganized retail revolves around the local village shop and the haat. Shops are usually present in villages with a population of more than 500 people. They stock more product categories than what similar urban shops would, but there isn’t much variety offered within a category. Haat are weekly mobile supermarkets that are spread over 2-3 acres of land, with more than 300 stalls, selling anything from animal feed to local medicines. Retail Outlets With in Villages These are basically run at low scale, mostly as a secondary business activity. They deal in limited product and limited brand variety within each product category. The number of retail outlets is subject to the population of villages in India. Villages with less than 500 may not even have one shop. Rural areas having a population of more than 1500 enjoy a strong parallel retail format set-up.
Periodic Markets (Shandies /Haats/ Jathras) Periodic markets are traditional places where the rural consumers congregate as a rule. While shandies /haats are held on a particular day every week, periodic markets are normally timed with religious festivals. These places attract a large number of itinerant merchants, and temporary shops are set up to sell all kinds of goods. The importance of haats in the lives of the rural people is evident from the fact that 81% of the buyers are regular visitors to periodic markets. Fifty eight per cent visit ‘haats’ to buy specific products, although, more than half of them have similar products available in their villages. When organized retail first made its presence felt in rural India, it wasn’t a pure retailing operation targeting the rural masses. Companies like DSCL and Godrej who had significant agri-business interests, set them up to meet the needs of farmers in a store’s catchments area. A typical agri-input store would have a catchment area of around 100 villages spread over 20-25 kms. Says Ashik Hamid, associate director, Technopak, “These stores are one-stop shops meant to meet the occupational needs of farmers by providing agri-inputs and fertilizers”. These stores, like DSCL’s Hariyali Kisan Bazaar, ITC’s Choupal Saagar etc. tend to be located in small towns that function as procurement hubs where the farmers come to sell their produce. Their earnings are tapped then and there, by getting them to combine their visit with shopping. These stores tend to target farmers with all sizes of holdings, “We build our offerings for everyone, from the farmer owning 20 acres to the one owning 200”, says Rajesh Gupta, business head, Hariyali Kisan Bazaar, “It wouldn’t be done any other way as there is a similarity on the application side, everyone needs the same inputs.” Limitation faced by rural retailing These limitations are attributed to various factors such as: • Inadequate infrastructure (road, railway connectivity) with highly dispersed and thinly populated villages that need huge expenditure to establish distribution channels • Inability of the small rural retailers to invest in stocks for multiple products or brands • Limited or traditional medium of communication and other sales promotion difficulties • Low per capita income and social, economic, and cultural differences of the rural masses as compared to the urban segment • Low level of exposure to different product categories and product brands s
13. Discuss ethical and legal issues in retailing. Why ethical issues are gaining importance in retail business? Ans Use “ethics” as competitive advantage or differentiator
Use “ethics” as competitive advantage or differentiator
Wider interest of consumers and society
Focus on customers
Awareness of ethical issue
Personal morals And intentions
Using child labor: unethical and illegal Using refurbished product as new : unethical
Factors influencing ethical decision making
Ethical training Corporate culture Top management attitude
Firm structure Perception of issues Situational pressures
Ethical decision Making process
Legal rules Influence of opinion Leaders
Post behavioral consequences
Factors influencing ethical decision making 1. Aware ness of ethical issues 2. Moral philosophy 3. Organizational environment 4. Company ethics program 5. Social responsibility –
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Community activities Legal obligation paying taxes Hiring socially deprived or challenge people Working hours for employees Not selling certain items in larger interest of society Environment friendly Donations to social causes Recycling of products and packaging
Definitions of ethics • The philosophical study of moral values and rules
The process of determining how one should hold the interests of various stakeholders, taking into account moral values/principles Conforming to an accepted standard of human behavior. Personal code of conduct based on respect for one's self, others, and your surroundings. Ethical motive: motivation based on ideas of right and wrong Ethical issues
ETHICAL PERFORMANCE AND RELATIONSHIPS IN RETAILING Ethical challenges fall into three interconnected categories: 1. Ethics, which relates to the retailer’s moral principles and values 2. Social responsibility, which involves acts benefiting society 3. Consumerism, which entails protecting consumer rights Ethics Retailers have a moral obligation to act ethically. Heightened societal and media attention is being paid to firms’ behavior. A failure to be ethical may lead to adverse publicity, lawsuits, the loss of customers, and a lack of self-respect among employees. A retailer with a sense of ethics acts in a trustworthy, fair, honest, and respectful manner with each of its constituencies. Executives must articulate to employees and channel partners what kinds of behaviors are acceptable and which are not. The best way to avoid unethical acts is for firms to have written ethics codes, distribute them to employees and channel partners, monitor behavior, and punish poor behavior. Ethical issues The following practices are unethical (and sometimes illegal, too): Raising prices on scarce products after a natural disaster Not having adequate stock when a sale is advertised Charging high prices in low-income areas because consumers there do not have the transportation mobility to shop out of their neighborhoods Selling alcohol and tobacco products to children Having a salesperson pose as a market researcher when engaged in telemarketing Defaming competitors Selling refurbished merchandise as new Pressuring employees to push high-profit items, even if these items are not the best products Selling information from a customer data base Many trade associations, such as the Direct Marketing Association (DMA), promote ethics codes to member firms. These are some of the DMA’s provisions: All offers should be clear, honest, and complete Ethical issues Disparagement of any person or group on grounds addressed by federal or state laws that prohibit discrimination is unacceptable All contacts should disclose the name of the sponsor and each purpose of the contact Social Responsibility A retailer exhibiting social responsibility acts in the best interests of society, as well as itself.
The challenge is to balance corporate citizenship with a fair level of profits for stockholders, management, and employees. Some forms of social responsibility are virtually cost-free (e.g., having employees participate in community events); others are more costly (e.g., making donations to charitable groups). Most retailers know that socially responsible acts do not go unnoticed by consumers. Examples of socially responsible actions by various retailers are provided. Consumerism Consumerism involves the activities of government, business, and other organizations to protect people from practices infringing upon their rights as consumers. About 45 years ago, President Kennedy said consumers have these rights: 1. The right to safety 2. The right to be informed 3. The right to choose 4. The right to be heard Ethical issues Retailers and their channel partners need to avoid business practices that violate these rights. These are some reasons why: Some retail practices are covered by legislation. People are more apt to patronize firms perceived as customer-oriented and not to shop with ones seen as greedy. Consumers are more knowledgeable, price-conscious, and selective than in the past. Large retailers may be viewed as indifferent to consumers. The use of self-service is increasing, and it can cause frustration for some shoppers. Innovative technology is unsettling to many consumers. Retailers are in direct customer contact, so they are often blamed for and asked to resolve problems caused by manufacturers. Ethical issues One troublesome issue for consumers involves how retailers handle customer privacy. A consumer-oriented approach comprising these elements can alleviate negative shopper feelings: • Notice
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Consumer choice Access and correction Security Enforcement
To avoid customer relations problems, many retailers have devised programs to protect consumer rights without waiting for government or consumer pressure to do so. These are examples: a. JCPenney has adhered to the seven basic concepts of the “Penney Idea” for more than 90 years. b. Giant Food devised a consumer bill of rights 40 years ago, patterned on President Kennedy’s. Beside the rights stated by Kennedy, it also includes the right to redress and the right to service.
A number of retailers have voluntarily enacted product-testing programs. They include Sears, Wal-Mart, A&P, Macy’s, and Target Stores.. Other consumerism activities undertaken by retailers are setting clear procedures for handling complaints, sponsoring consumer education programs, and training personnel on how to interact properly with customers. Consumer-oriented activities are not limited to large chains; small firms can also be involved .
Legal issues Understand all legal issues 1. Suppliers relations 2. Competitors relations 3. Consumer relation 4. Employee relation Legal issues Supplier relations • Price fixing by vendors or manufacturers
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Discriminatory pricing: offering different discounts to retailers Product: counterfeiting Purchasing : Mandatory Quality checks Sourcing from manufacturers using illegal practices Bribery :inducement from vendors
Legal issues Competitors Horizontal price fixing Promotion: deceitful promotion/palming off selling products of other brands under known brands Trademark: using private labels Consumers Pricing Deceptive pricing: bait and switch Predatory pricing Promotion: Deceptive ads Deceptive sale practices : omitting key facts , superficial discount Legal issues Consumer: Product
Product safety Product liability Warranties Selling of products such as liquor /tobacco to children Selling product by paying commissions to employees Encourage consumerism Place: not abiding zoning laws Legal issues Employees relation Minimum wage act Hours not more than 9 hours a day Heath and safety of workers Child labor protection Discrimination of challenged persons
Q 15 • The Merchandise Hierarchy
Every retail organization, regardless of its size, will have a merchandise reporting hierarchy. It is important to understand this for your key accounts because it represents the organizational structure of the buying office of the company. It dictates whom to call on and it tells you something about how that retailer sees its customers. At its middle to lower levels it enables the categorizing and grouping of products for effective store display of merchandise and comprehensive analysis of sales data. A hierarchy is established with a logical pattern fashioned after the way the customers are most likely to shop when they enter the store. STORE A typical customer will locate the type of retailer they wish to shop at based on their specific social and demographic characteristics. Discounter, Specialty Store, etc. In this case Department Store DEPARTMENT Upon arriving in the store the customer will locate the specific department of merchandise desired. Men's, Women's, Junior Fashions, etc. In the case of this example it is Children's CLASS Within the specific area the customer looks for the class of merchandise desired. Blouses or Shirts, Pants, Dresses, etc. In the case of this example it is Shirts. SUBCLASS The next lower level that further segments merchandise types is subclass. This level will likely separate like kinds of merchandise based on the differing features each type has.
In the Sports Designer subclass the choices range from $15.99 to $19.99. STYLE Once the appropriate price point has been chosen, the customer will find the style
This style will have been assigned a specific number by the retailer in their reporting system. COLOR AND SIZE The lowest levels in the hierarchy is where this customer will ultimately find what they are looking for. These levels are defined at the color, and finally, the size the customer requires.
Retail Planning Networking
1. Develop mission statement 2. Establish Objectives 3. Conduct situational analysis 4. Identify strategic alternatives 5. Select market to compete 6. Obtain resource needed to compete 7. Developing positioning strategy 8. Implement the strategy 9. Evaluation of results
Develop Mission statement • A mission statement defines the core purpose of the organization - why it exists. The mission examines the "raison d'etre" for the organization beyond simply increasing shareholder wealth, and reflects employees' motivations for engaging in the company's work. Effective missions are inspiring, long-term in nature, and easily understood and communicated.
Reason or justification for existing. A statement that captures an organization's purpose, customer orientation and business philosophy.
A mission statement outlines what the company is now. It focuses on today; it identifies the customer(s); it identifies the critical process(es); and it states the level of performance. Retail Planning Networking
Scope of Mission statement should cover: 1. Products/services offered 2. Scope of business 3. Corporate culture 4. Philosophy of management Macdonald Mission: Quality, Service ,Convenience and value Establish Objectives: Formal statement what firm achieve A concise statement describing the specific things an organization must do well in order to execute its strategy. Objectives often begin with an action verbs such as increase, reduce, improve achieve, etc. Short term and long term objective 1. Specific 2. Measurable 3. Attainable 4. Indicative of priorities Starbucks : 30000 outlets by 2010
Conduct situational analysis SWOT Financial resources Physical assets Management skills Merchandize PEST analysis Political Economical Social Technical Identify Strategic alternatives 1. Market penetration 2. Market development
3. Retail format development 4. Diversification
Role of Information technology in retailing
SIMPLIFYING A COMPLEX INDUSTRY: THE ROLE OF IT
RETAIL OPERATIONS ARE EXTREMELY COMPLEX Much of the retail operations functionality are driven by customized point solutions in areas such as merchandizing, supply chain management,in-store operations, seasonality and promotions planning. This means the underlying IT systems to drive operations are equally complex. Retail operations are inherently complex due to four factors: a) Product complexity. The retail sector has a high degree of product complexity, with the number of SKUs in stores running anywhere from the tens of thousands to more than two hundred thousand, a high degree of seasonal and fashionable items, and a lack of standardization of product hierarchies. b) Supply chain challenges. With so many different outlets and channels, multiple handoffs, and high frequency of replenishment, developing and managing an efficient supply chain remains one of the primary challenges in the retail sector. c) Scale complexity. Retail operations are executed on an extremely complex scale. The U.S. retail sector alone deals with hundreds of millions of transactions per day, driven by millions of customers who shop through tens of thousands of outlets. d) Process complexity. The business processes that support this environment are also inherently complex due to the multiple touch points across players in the value chain (manufacturer,distributor, retailer, consumer), the coordination required between the different planning cycles of each of these players, and geographic dispersion. Careers in retail Rise in disposable income and increased scope for retail professionals Good Prospects for the Undergraduate Bachelor’s degree candidates who focused upon retail or merchandise management have great prospects Opportunities for the MBA Candidates • reap even higher rewards • hired to work in brand management at the headquarters of large corporations
• fit in the product management teams • on the road toward product director and brand manager. • Initial broad based training then move to buyer and up In these positions, national and international shopping is required to identify retail trends and to develop merchandising and advertising strategies. The successful manager is also involved in product development, financial planning, and vendor relations.Preparation for the Retail-Oriented Career promising opportunities for people-oriented,service-oriented individuals “There is an art and there is a science to customer service. When translated to academics, this includes analytical and communications skills.” Formal training / Skill on • demographic trends, • population trends, • statistics • changing lifestyles. • the present and emerging technologies of selling.” • High-tech, information-based skills Computerized information labor, inventory • Basics of philosophy, sociology, and psychology to understand customer • Interactive skill for solving dispute and consistency of service to customers
Sales Executive or Marketing Executive A sales executive’s main job is to attend to customers and help them during their purchases. Some of the other responsibilities of a sales executive are: • Explaining to all walk-in customers about the products and providing any additional information that would help customers to make the right product choice. • Taking part in the entire selling process from prospecting to closing the sale. • Achieving the personal sales targets set by the store manager. • Managing in-store inventory and cash counter (in some cases). • Conducting product demonstrations when necessary. Store Manager The store manager is the overall in-charge of all the activities at a retail store He has a team of sales executives who help him handle all major retailing activities like merchandising, space management, inventory management, sales management and customer support. Some of the responsibilities of a store manager are: • Achieving predetermined monthly and annual sales targets. • Leading and motivating a team of in-store sales executives. • Preparing pre-sales reports like potential client lists and sales progress charts. • Preparing post-sales reports like daily and weekly sales reports. • Coordinating with logistics to ensure timely deliveries to customers and to maintain optimum inventory levels in the branch. • Developing human resources at the branch level. • Preparing business plans for the financial quarter. • Supervising the overall merchandising of the store and designing the look of the store. • Designing and carrying out promotional schemes within the store. Desired Skill-set required for Sales Executive/Store Manager • Good communication skills (ability to persuade customer). • Patience to deal with all kinds of customers. • Good product knowledge (in terms of features). • Knowledge of competitor’s products.
• Good knowledge of store dynamics in terms of hot selling goods, high traffic spots (in the store) and merchandising requirements. Careers in retailing Sales and Merchandising Representative This is an emerging career in retailing. Recognizing the role of retail stores in selling and building the image of their products, manufacturers have started employing Sales and Merchandising Representatives (SMR) to communicate information to retailers. An SMR is responsible for • earning the mind-share and shelf-space of the retailer • educating sales teams in stores about the nature and working of the product • motivating retailer’s salespersons to promote the manufacturer’s products • collecting information on new products and buying patterns of retail customers. Careers in retailing Ownership opportunities • Own store • Franchisee • Vendor • Category management • Supply chain / logistic provider • Consolidators • Any out sourced activities by retailers
Retailing is a dynamic field where success depends on ability to respond .Category management helps managing the retail business. Competitive advantage and customer satisfaction through Category management. Category is basic unit of analysis for making merchandise decision Category is assortment of items that consumer sees as reasonable substitute for each other. Category management means managing category as strategic business unit. Definition: Category Management is a retailer/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value. • Category management Definitions 1. Continual monitoring of expenditures and supplier performance in specific buying categories with the intent of driving ongoing cost or supplier performance improvements. Also sometimes referred to as supplier relationship management or commodity management. 2. A relationship-oriented technique that some firms, especially supermarkets, are beginning to use to improve shelf-space productivity. 3. The management of brands in a group, portfolio or category with specific emphasis on the retail trade’s requirements Six components of category management First two are Core components and rest are enablers 1. Strategy : linked to company’s goals and mission
2. Business process: Process must be strong then results will follow 3. Performance measurement 4. Information technology 5. Organizational capabilities 6. Co-operative trading partner relationship
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Bar coding and RFID
Bar coding No barcode, don't supply, say top retailers Chennai , Feb. 15 2006 FROM July 1 this year, billing at the cash counters of the country's top retailers is expected to be faster and smoother. A clutch of prominent retailers, from FoodWorld, Spencers and Nilgiris to Pantaloon and Piramyd, has signed an agreement to accept only products which are barcoded at the suppliers' end. At present, almost 70 per cent of the consumer products that organised retailers sell come from suppliers with EAN barcodes marked on their product packaging. For the rest 30 per cent, retailers themselves affix bar code stickers to ensure efficient billing as well as smooth movement at the back-end, adding to their costs. An EAN bar code is an internationally accepted specification which gives a company an universal country code, followed by the company and product code. Universal Product Code (UPC) A classification for coding data onto products by a series of thick and thin vertical lines. It lets retailers record data instantaneously as to the model number, size, color, and other factors when an item is sold, and to transmit the data to a computer monitoring unit sales, inventory levels, and other factors. The UPC is not readable by humans. Barcoding In the UPC-A barcode, each digit is represented by a seven-bit sequence, encoded by a series of alternating bars and spaces. Guard bars, shown in green, separate the two groups of six digits. Barcoding Barcoding provides the means for automatic data capture of information. When used with int’l numbering standards, it permits universal and unique identification of goods, services, assets etc. Barcoding Barcoding WHY BARCODES ? To enable data capture - Once only (at point of manufacture) in the supply chain. - For 100% accuracy and high speed. - Easy integration with in-house software applications. - Generation of automated billing, packing lists, delivery challans etc. - Effective product track & trace - Faster customer turn around at points of sale Why Barcode? Barcodes are extensively used worldwide, over past 25 years across industry sectorsandtradefor a wide number of applications. Some applications of barcoding are :i) In manufacturing a) for inventory management of finished goods / raw materials b) work-in-progress c) product track & trace
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ii) In retail a) at point-of-sale b) stock management c) demand forcasting d) automated stock ordering e) track & trace of products Barcoding Two barcode standards : USA led countries : UPC : Universal product code Europe led countries : EAN European Article Numbering System. The international standard bar code for retail food packages. Both are compatible. India is following EAN system with country code 890 884 Cambodia 885 Thailand 888 Singapore 890 India 893 Vietnam 899 Indonesia Barcoding Key drivers for barcoding and anticipated benefits Barcoding is international practice for past 25 years and there is increasing demand from overseas buyers for accepting only barcoded supplies. Product track & trace requirements enabling product recall (if required for expired drugs, defective/spurious goods, etc.) Global demand for efficient and automated supply chains for product movement from point of manufacture to its point of sale/consumption. Cost pressures to reduce end product prices to consumers thru reduction in supply chain costs. Barcoding Elimination of wastages in supply chains due to efficient processes. Global movement towards closer integration of suppliers and buyers worldwide and global requirement for lowering end product costs. Indian exporters need to integrate with international best practices (barcoding, EDI etc) or get isolated in international trade in coming years. Usage of Barcoding in India – current status Automobile Industry–for inventory management/ track & trace/production scheduling. FMCG Industry – for inventory management/track & trace/production scheduling. Readymade garments Industry – for inventory management/track & trace/production scheduling. Pharmaceutical Industry – for inventory management / track & trace/production scheduling. Retail Industry – FMCG, Apparel, Grocery, etc. Exports (on buyers directives) Healthcare (hospitals etc)
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RFID Radio-frequency-identification (RFID) chips, which can track individual items through the entire supply chain and onto the store floor, are often touted as the path to supply chain nirvana for retailers and consumer product companies. But the nascent technology isn't ready for the demands of most of today’s supply chains, and the IT costs required to support its applications can be steep. Proceed with caution. Certainly, the size of RFID tags belies their potential. About as large as a pinhead, they consist of an antenna and a chip that contains an electronic product code (EPC). These tags can store more information about a product than bar codes can—not just what it is but also, for example, when and where it was made, where its components come from, and when they might perish. Unlike bar codes, which need line-of-sight contact to be read, RFID tags also act as passive tracking devices, signaling their presence over a radio frequency when they pass within yards of a special scanner. The tags have long been used in high-cost applications such as automated tolling systems and security-ID badges, but recent innovations have caused the price of the tags to plummet and their performance to improve: expected to cost no more than 5 cents apiece in a few years
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An RFID system may consist of several components: tags, tag readers, edge servers, middleware, and application software. The purpose of an RFID system is to enable data to be transmitted by a mobile device, called a tag, which is read by an RFID reader and processed according to the needs of a particular application. The data transmitted by the tag may provide identification or location information, or specifics about the product tagged, such as price, color, date of purchase, etc. RFID RFID mandates Wal-Mart and the United States Department of Defense have published requirements  that their vendors place RFID tags on all shipments to improve supply chain management. . Due to the size of these two organizations, their RFID mandates impact thousands of companies worldwide. The deadlines have been extended several times because many vendors face significant difficulties implementing RFID systems. In practice, the successful read rates currently run only 80%, due to radio wave attenuation caused by the products and packaging. In time it is expected that even small companies will be able to place RFID tags on their outbound shipments. Since January, 2005, Wal-Mart has required its top 100 suppliers to apply RFID labels to all shipments. To meet this requirement, vendors use RFID printer/encoders to label cases and pallets that require EPC tags for Wal-Mart. These smart labels are produced by embedding RFID inlays inside the label material, and then printing bar code and other visible information on the surface of the label. RFID March 22, 2006 P&G highlights the retail industry's first end-to-end product visibility supplychain solution Using Vue Technology's TrueVUE RFID Networking Platform, consumer goods giant Proctor & Gamble highlights the retail industry's first end-to-end product visibility supply-chain solution. Using Vue's enterprise solution, P&G will show
how inventory cases are tracked throughout the supply chain directly to the store shelf. The retail giant wants to demonstrate to internal stakeholders and external customers as well how improved visibility of inventory reduces out-of-stocks, shrinkage, and supply chain costs while helping execute promotions and new product introductions.
Electronic Data Interchange (EDI) EDI is the exchange of business data using an understood data format. It predates today's Internet. EDI involves data exchange among parties that know each other well and make arrangements for one-to-one (or point-to-point) connection, usually dial-up. EDI is expected to be replaced by one or more standard XML formats. XML (Extensible Markup Language) is a W3C initiative that allows information and services to be encoded with meaningful structure and semantics that computers and humans can understand. XML is great for information exchange, and can easily be extended to include user-specified and industry-specified tags. Definition: Electronic data interchange is computer to computer exchange of business documents from retailer to vendor and back ASN: Advanced shipping notice is sent by vendor computer to Retailer’s computer giving shipment details and schedule. Other information sent on EDI: On hand delivery status, vendor promotions, cost changes, PO changes, order status, retail prices, transportation Proprietary EDI : Owned by large retailers of exchanging data with own vendors: Walmart etc. Electronic data interchange Intranet : Secured communication system within company over internet. Extranets: Extranet collaborative network that uses internet technology. There is secured access provided between intranet and extranet for specified users. Advanced EDI: Just no more data , but pictures of merchandise, negotiations over electronic media and product development. CPFR: collaboration, planning, forecasting and replenishment module ,is popular in drug and grocery industries.
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Electronic data interchange : Security of information 1. Authentication : Person and terminal used in system 2. Authorization: Permission to use 3. Integrity: no change in info sent and info received at other side.
Segmentation based on consumer products.
Consumer products are those products that are intended for the ultimate consumer. Consumer products can be sub-divided into four sub-groups: 1. Convenience products 2. Shopping products 3. Specialty items 4. Unsought items Convenience products Convenience products are products that are purchased frequently but on which the consumer not willing to spend much time or effort. These include staples like packaged foods, milk, bread, and emergency products like medicine. Shopping products( comparison products) : Shopping products are products that a customer feels are worth the time and effort to compare with competing products. These include furniture, clothing, washing machines, television sets, etc. Specialty items: Specialty products are consumer products that the customer makes a special effort to purchase. The consumer is willing to search for such specialty products. Any branded product that customers insist on by name is a specialty product. Unsought items: Unsought goods are products that potential customers do not yet want or know about. Customers do not buy such products unless promotion shows their value. Life insurance and encyclopedias are examples of unsought products. Dimensions of product-market segmentation Used for planning market strategy • Demographic ( Identifying customers)
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Geographic ( defining trade area) Psychographic( Finding preferences/choices) Behavioral ( finding buying practices) Combination of above may be required in practice
Point of purchase displays and promotion
Impulse purchases Low involvement items Hence display and store layouts are very important • Using Point-of-Purchase Displays • POP
Definitions of point of purchase • the place at which a product is purchased by the customer. The point of sale can be a retail outlet, a display case, or even a legal business relationship of two or more people who share responsibilities, resources, profits and liabilities. • Display materials used at the Point-of-Sale to attract customer attention to a product. • a type of product display used in stores to attract end users and promote impulse purchases. Definitions of point of purchase POP communication is promotional signs and interior display often displayed at point of sale or alongside display of merchandise. Functions of POP Induce sales ( 70 % purchase decisions are taken in store) Reinforce message being communicated Essential in self service outlets
• Challenges in Retail banking Retail banking The annual growth in bank credit to the commercial sector is at 25.4% as on March 31, 2007 and was lower than 27.2% against previous year. Till 2010, retail banking is expected to grow at a CAGR of 28% to touch a figure of INR9,700 billion. This requires expansion and diversification of retail product portfolio, better penetration and faster service mechanism Retail banking Dynamic scenario Financial product designing and marketing New ways to create income growth- through innovations, differential pricing and superior delivery Retail banking Large and distributed market High level of employees Consistent delivery at point of sale ATM
Causes of mark down Price setting methods Causes of Mark-downs Mark-downs resulting from buying errors: • Overbuying caused due to incorrect demand forecasting, or buying more than the current stock requirement. • Wrong buying. The color, style, sizes, etc. of the goods purchased may not be suitable keeping in mind the preferences of the customers. Or the retailer might have bought novelty goods that failed to click.
• Buying at the wrong moment. Goods are bought too early or too late, or they are received too late for sale. • Individualistic or ‘pet buying’. A person in charge of purchases may buy some products just because he has a liking for them, even though such products are not popular.
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Failure to examine incoming stock for defects. Mark-downs resulting from pricing errors: The initial price has been set too high. Competitors’ prices have not been considered while setting the initial prices. The initial markdown has been too small. Mark-downs resulting from selling errors: • Failure to display merchandise properly, i.e., in the right location, with proper decoration • Careless handling of the goods resulting in their deterioration. For example, a salesman has to show the displayed pair of shoes to each and every customer that walks in. If those are not handled properly, these may have to be sold as shop-worn stock.
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